Jakarta. The Indonesian government has high hopes that ongoing discussions on a comprehensive economic partnership agreement with South Korea will encourage investment through special arrangements, according to government officials.

Industry Minister MS Hidayat held a meeting in his office on Monday with Trade Minister M. Lutfi and Mahendra Siregar, chief of the Investment Coordination Board (BKPM), to discuss the country’s stance on the CEPA, as the proposed agreement is known.

Hidayat said the government hoped the South Korean government would treat the soon-to-be-agreed CEPA as an invitation to invest in the Southeast Asian county rather than just to do trade.

“That is our intention,” he said.

The government was criticized for poor results from the Asean-China Free Trade Agreement, which has seen the domestic market flooded by cheaper products made in China, rendering a lot of domestic-made products uncompetitive.

Indonesia saw its trade deficit widen from $2.5 billion in 2009, a year before ACFTA was signed, to around $7.24 billion now.

Bilateral trade with South Korea was worth $23 billion last year with Indonesia reporting a deficit of $170 million, a heavy drop from a $3 billion surplus in 2012.

South Korea already enjoys good access to Indonesian markets thanks to a 2006 free-trade agreement with the Association of Southeast Asian Nations.

Talks on the CEPA entailed the objective of bolstering bilateral trade to $50 billion by 2015 and $100 billion by 2020.

BKPM’s Mahendra echoed Hidayat’s remarks, saying the Indonesian government would push for measures in which increases in bilateral trade will lead to more investment. “We want the CEPA to instill confidence among South Korean investors to do businesses here,” he said.

Hidayat said the government expects the CEPA to bring investment in petrochemicals, electronics and minerals refining.

South Korea is ranked fourth in foreign direct investment in Indonesia. South Korean companies invested $2.2 billion in Indonesia last year, up from $1.9 billion in 2012.

Among South Korean investors are steel-maker Posco, which together with state-controlled steel-maker, Krakatau Steel, is building a $6 billion integrated plant.

Though the CEPA has been discussed by both governments since 2006, the first round of negotiations started in 2012.

Trade Minister M. Lutfi said the government hopes to conclude the talks in May this year.

By Tito Summa Siahaan on 09:39 pm Mar 10, 2014